Housing aspirations

Housing is a key generational issue. More precisely, exclusion of younger generations from home ownership is a focus for most studies on intergenerational equity.1 Indeed one of the best-known generational trends of recent years has been defined solely in relation to tenure (“Generation Rent”) and others (like the “Boomerang Generation”) have housing pressures at their core.

This generational aspect to housing is also very clear in government policy and statements. As the Planning Minister Nick Boles makes clear, the current government is focused on meeting aspirations for ownership, and this is frequently couched in terms of “Housing the next generation”, the title of his recent speech at the Policy Exchange.

In that speech, Nick Boles asserts that “No aspiration is more deeply embedded in the British psyche than the desire to own your own home.” While that may be a slight exaggeration, reflecting his brief to deliver more homes, our generational analysis does illustrate the persistent and near universal attraction of home ownership.

As the chart above shows, the aspiration to own remains high and consistent between all generations and over time – given a free choice, over 80% of each generation would choose home ownership. The data on this question only go back to 1996, but the lack of change in views and almost complete consistency between generations are rare, and suggest a preference that is deep-rooted.

This is particularly the case given this period covers substantial ups and downs in the property market, not least since the start of the economic crisis in 2007/8. Our own polling since 2010 suggests aspirations haven’t changed in the last couple of years.

There is, however, much greater generational variation and change over time when people are asked whether they would advise a newlywed couple to buy or rent, shown in the chart above.

First, as you might expect, the overall pattern follows economic cycles much more closely than a question that asks about “ideal” tenure. This includes a significant dip in the early 1990s, and then a further decline in 2008, particularly among younger generations.

Looking across generational patterns, younger cohorts are less likely to advise our newlyweds to buy throughout most of the time period covered. This was clearest in 2008, where there is a very significant generational gap between the youngest and oldest: only around 20% of generation Y recommended buying in 2008, compared with around 60% for both baby boomers and the pre-1945 generation.

There is a slightly different general trend when respondents are asked whether they would tell a young couple that owning their home can be a risky investment. There is still a significant increase in perceived risk in the early/mid 1990s, but we do not see as large or consistent an increase in perceived risk in 2008. This is likely to be related to the particular nature of the latest economic crisis: while house prices fell substantially, owning a home was still perceived as relatively safe compared with collapsing banks and an apparent global financial meltdown.

Taken with the previous chart, it’s clear that the real shock to perceptions of home ownership as a one-way bet was in the early 1990s. The latest crisis has still shaken people, but not as much as we may have expected.

...overall it seems we’re not seeing a generational movement away from the desire to own your own home.

Looking at individual cohorts, younger generations tend to have a higher perception of risk than each previous generation, and again generation Y stands out as most concerned, particularly as the three older generations have come closer together in the latest survey from 2010.

Again, taken together with the previous chart, this suggests a heightened sensitivity to the risks and downsides of home ownership among younger cohorts. This is understandable: given their generally lower income and assets, they have proportionally more to lose. It is also likely to reflect the longer-term experience of housing price gains experienced by older cohorts.

But overall it seems we’re not seeing a generational movement away from the desire to own your own home. Generation Y stand out, but they are not hugely different from generation X when the latter were a similar age, particularly when we take account of the particularly challenging economic and housing market conditions they are currently facing, with increasing numbers “locked out” of home ownership. Despite this, there doesn’t seem to be a fundamental shift to embracing the benefits of renting.

Housing is going to be a key battleground in the run-up to the next election, and presents an interesting choice of emphasis for policy-makers and political parties. The reality is that home ownership is a more distant dream for many and that seems set to continue (particularly for those unassisted by parents or other benefactors), until a step-change in supply is achieved. So should the focus be on dealing with that reality and particularly improving the experience of private renters or to play to aspirations for ownership?

Of course policy and manifestos will cover both, but it’s clear that both main parties are fighting to claim aspiration for ownership as their own.2 Some argue that this short-term focus and encouragement of a few more people into owner-occupation reinforces the problem. But the stability in aspirations seen here and elsewhere shows that support for home ownership still needs to be front and centre in any housing policy.

1 David Willets (The Pinch) and Ed Howker and Shiv Malik (The Jilted Generation) devote chapters of their books to housing.